Efficiency and challenges in public real estate management: insights from Lithuania
Abstract
Public real estate is considered an integral part of national wealth. It generates a wide range of economic activities that contribute to creating and providing common public goods. This study examines the efficiency of public real estate management in Lithuania. Our findings show that public property use, disposal, and management strongly depend on the managerial approach. We apply data envelopment analysis (DEA) in addition to the income value, regression, and correlation methods. We find that there are certain biases present due to the exclusion of some state-owned properties from the public register. Furthermore, we identify the need for greater precision in the indicators used for financial reporting of state-owned assets. The excessive number of vacant asset units poses a challenge, as it requires substantial maintenance expenditures. Moreover, the appraisal of alternative use of these assets is lacking, thereby limiting the potential for maximizing public benefits. Our analysis reveals that the rental price per 1 m2 and the residual value of the leased premises are the most critical determinants influencing the management efficiency of publicly owned property. Furthermore, it is evident that the residential property is the only type of state-owned property managed efficiently within the Lithuanian public sector. These findings underscore the importance of formation of robust public real estate policies.
Keyword : public real estate management, efficiency, DEA approach, decentralized model, centralized model
How to Cite
Cohen, V., Bereznauskė, E., Burinskas, A., & Raslanas, S. (2023). Efficiency and challenges in public real estate management: insights from Lithuania. International Journal of Strategic Property Management, 27(4), 275–289. https://doi.org/10.3846/ijspm.2023.20362
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Constantin, D. L., Draguşin, M., Petrescu, R. M., & Iosif, A. E. (2012). The effective management of municipal real property. The question of services for the business use of real property. Amfiteatru Economic Journal, 14, 738–754.
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Gross, M., Źróbek, R., & Špirková, D. (2014). Public real estate management system in the procedural approach – a case study of Poland and Slovakia. Real Estate Management Valuation, 22, 63–72. https://doi.org/10.2478/remav-2014-0028
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Hernes, V. (2021). The case for increased centralization in integration governance: the neglected perspective. Comparative Migration Studies, 9, 32. https://doi.org/10.1186/s40878-021-00247-z
Higgins, D. M. (2022). Sovereign public sector property fund: building a conceptual framework. Journal of General Management, 49(1), 38–45. https://doi.org/10.1177/03063070221140727
Hoing, A., & Kaempf-Dern, A. (2019, January). Effective decision-making for municipal real estates [Conference presentation]. 26th Annual European Real Estate Society Conference, Cergy-Pontoise, France. https://doi.org/10.15396/eres2019_341
Just, T., & Maennig, W. (Eds.) (2012). Understanding German real estate markets. Springer. https://doi.org/10.1007/978-3-642-23611-2
Kaganova, O. (1999). What new have we learned through indicators. In Monitoring indicators of land and real estate reform in Russian cities (Report). The Urban Institute and the Institute for Urban Economics.
Kaganova, O., & Nayyar-Stone, R. (2000). Municipal real property asset management: an overview of world experience, trends and financial implications. Journal of Real Estate Portfolio Management, 6(4), 307–326. https://doi.org/10.1080/10835547.2000.12089624
Kaganova, O., & Amoils, J. M. (2020). Central government property asset management: a review of international changes. Journal of Corporate Real Estate, 22(3), 239–260. https://doi.org/10.1108/JCRE-09-2019-0038
Klumbytė, E., & Apanavičienė, R. (2014). Real estate strategic management model for Lithuanian municipalities. International Journal of Strategic Property Management, 18(3), 279–291. https://doi.org/10.3846/1648715X.2014.942407
Koopmans, T. C. (Ed.). (1951). Analysis of production as an efficient combination of activities. In Activity analysis of production and allocation. Cowles commission for research in economics (Monograph No. 13, pp. 33–97). John Wiley & Sons.
Liu, L., Zuo, W., Hu, Q., & Zeng, L. (2022). Research on property service mode innovation in the context of transformation and upgrading. International Journal of Strategic Property Management, 26(5), 332–344. https://doi.org/10.3846/ijspm.2022.17588
Mackevičius, J., & Ragauskienė, E. (2012). State property: economic analysis and management. Ekonomika, 91(2), 117–128. https://doi.org/10.15388/Ekon.2012.0.892
Marona, B., & van den Beemt-Tjeerdsma, A. (2018). Impact of public management approaches on municipal real estate management in Poland and the Netherlands. Sustainability, 10, 4291. https://doi.org/10.3390/su10114291
Mažylis, L., & Jasudavičiūtė, I. (2005). Real estate management in Lithuanian municipalities. Organisational Management: Systematic Research, 35, 137–148. (in Lithuanian)
Ministry of Finance of the Republic of Lithuania. (2017, February 23). Order of the Ministry of Finance of the Republic of Lithuania on establishment of efficiency indicators for the use of state real estate for administrative purposes and norms for the provision of real estate for administrative purposes necessary for the execution of activities and the implementation of the public functions of the state (No. 1K-65). Vilnius. (in Lithuanian)
Muczyński, A. (2015). An integrated approach to real estate (portfolio) management. Real Estate Management and Valuation, 23(2), 5–16. https://doi.org/10.1515/remav-2015-0011
National Audit Office of Lithuania. (2018). Management of State real estate (No. VA-2018-P-60-8-1). Vilnius.
National Audit Office of Lithuania. (2020, July 15). Management of State immovable property transferred to municipalities under the right of entrustment (No. VAE-6). Vilnius
Phelps, A. (2011). Municipal property asset management – a comparative study of UK and Russia. International Journal of Strategic Property Management, 15(4), 416–437. https://doi.org/10.3846/1648715X.2011.642537
Ragauskienė, E. (2011). Economic analysis of state property and the transformation of its management [PhD dissertation]. Vilnius University. (in Lithuanian)
Scarrett, D. (1983). Property management. Spon.
Seimas of the Republic of Lithuania. (2019, July 25). Amendment to the law on management, use and disposal of state and municipal property of the Republic of Lithuania (No. XIII-2398). Vilnius. (in Lithuanian)
Tamošiūnienė, R., & Paškevičienė, J. (2016). The relationship between financial ratios and the share price of a listed company in determining value. Science-Lithuanian Future, 8(2), 182–191. https://doi.org/10.3846/mla.2016.899
Trojanek, M. (2010). The application of income approach in property valuation in Poland. Economics & Sociology, 3(2), 35–47. https://doi.org/10.14254/2071-789X.2010/3-2/4
Trojanek, M. (2015). Strategic municipal real estate management. Journal of International Studies, 8(2), 9–17. https://doi.org/10.14254/2071-8330.2015/8-2/1
Turto bankas. (2016). Management, use and disposal of state assets in 2016 (Annual report). https://www.valstybesturtas.lt/filestore/content/files/view/VNT_Metine_ataskaita_2016_m%20(Final).pdf (in Lithuanian)
Turto bankas. (2017). Management, use and disposal of state assets in 2017 (Annual report). https://www.valstybesturtas.lt/filestore/content/files/view/web_TB_2017_18.07.25.pdf (in Lithuanian)
Turto bankas. (2018). Management, use and disposal of state assets in 2018 (Annual report). https://www.valstybesturtas.lt/filestore/content/files/view/web_TB_2018_19.08.07.pdf (in Lithuanian)
Turto bankas. (2019). Management, use and disposal of state assets in 2019 (Annual report). https://www.valstybesturtas.lt/filestore/content/files/view/TB_2019_02_web.pdf (in Lithuanian)
Turto bankas. (2020). Management, use and disposal of state assets in 2020 (Annual report). https://tbwebmedia.blob.core.windows.net/isoriniaifailai/VNT%20ataskaita%20uz%202020%20m.pdf (in Lithuanian)
Van der Voordt, T., & Arkesteijn, M. (2016). Corporate and public real estate management. In M. Arkesteijn (Ed.), Dear is durable. Liber Amicorum for Hans de Jonge (pp. 79–84). Delft University of Technology. www.researchgate.net/publication/309727486_Corporate_and_Public_Real_Estate_Management
Varnelis, T. (2011). Analysis of factors influencing the capitalization rate: the case of Vilnius-Lithuanian capital. Science-Lithuanian Future, 3(4), 99–104. https://doi.org/10.3846/mla.2011.076
Wheeler, B. (1993). The case for commercialization of local authority property [Conference presentation]. Local Authority Property Managers Conference, Wellington, New Zealand.
Wojewnik-Filipkowska, A., Rymarzak, M., & Lausberg, C. (2015). Current managerial topics in public real estate asset management. World of Real Estate, 4(94), 5–10.
Źróbek, S., Źróbek, R., & Kuryj, J. (2012). Gospodarka nieruchomo´sciami zkommentarzem do wybranych procedur [Real estate management with comment to selected procedures] (2nd ed.). Gall. (in Polish)
Anderson, R. I., Fish, M., Xia, Y., & Michello, F. (1999). Measuring efficiency in the hotel industry: a stochastic frontier approach. International Journal of Hospitality Management, 18(1), 45–57. https://doi.org/10.1016/S0278-4319(98)00046-2
Asatryan, Z., Heinemann, F., & Pitlik, H. (2017). Reforming the public administration: the role of crisis and the power of bureaucracy. European Journal of Political Economy, 48, 128–143. https://doi.org/10.1016/j.ejpoleco.2016.08.004
Banker, R. D., Charnes, R. F., & Cooper, W. W. (1984). Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management Science, 30, 1078–1092. https://doi.org/10.1287/mnsc.30.9.1078
Brill, F. (2022). Playing the game: a comparison of international actors in real estate development in Modderfontein, Johannesburg and London’s Royal Docks. Geoforum, 134, 197–204. https://doi.org/10.1016/j.geoforum.2018.05.015
Carbonara, S., & Stefano, D. (2020). An operational protocol for the valorisation of public real estate assets in Italy. Sustainability, 12(2), 732. https://doi.org/10.3390/su12020732
Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision-making units. European Journal of Operational Research, 2(4), 429–444. https://doi.org/10.1016/0377-2217(78)90138-8
Chiang, T.-Y., & Perng, Y.-H. (2018). A new model to improve service quality in the property management industry. International Journal of Strategic Property Management, 22(5), 436–446. https://doi.org/10.3846/ijspm.2018.5226
Cohen, V. (2013). Development of commercial property market: analysis and economic assessment [PhD dissertation]. Vilnius University.
Constantin, D. L., Draguşin, M., Petrescu, R. M., & Iosif, A. E. (2012). The effective management of municipal real property. The question of services for the business use of real property. Amfiteatru Economic Journal, 14, 738–754.
Cymerman, J., & Cymerman, W. (2019). The effectiveness of real estate management in local government – an example of voivodship capitals in Poland. IOP Converene Series: Materials Science and Engineering, 603, 022006. https://doi.org/10.1088/1757-899X/603/2/022006
Giglio, J., Friar, J., & Crittenden, W. (2018). Integrating lifecycle asset management in the public sector. Business Horizons, 61(4), 511–519. https://doi.org/10.1016/j.bushor.2018.03.005
Girginer, N., & Kaygisiz, Z. (2013). Cost-utility analysis in municipalities: the case of Odunpazari and Tepebasi municipalities in the city of Eskisehir. Habitat International, 38, 81–89. https://doi.org/10.1016/j.habitatint.2012.02.001
Government of the Republic of Lithuania. (2009, November 25). Resolution of the Government of the Republic of Lithuania on the approval of the Strategy for Centralized Management of Public Property for 2009–2016 (No. 1597). Vilnius. (in Lithuanian)
Gross, M., & Wolny-Kucińska, A. (2021). Public real estate resource – a burden or a source of income? A study of municipal land management in Poland. Land Use Policy, 106, 105447. https://doi.org/10.1016/j.landusepol.2021.105447
Gross, M., Źróbek, R., & Špirková, D. (2014). Public real estate management system in the procedural approach – a case study of Poland and Slovakia. Real Estate Management Valuation, 22, 63–72. https://doi.org/10.2478/remav-2014-0028
Gross, M., & Źróbek, R. (2020). Some problems of the management of state and public sector land. E3S Web of Conferences, 171, 02003. https://doi.org/10.1051/e3sconf/202017102003
Grover, R., & Elia, E. (2011, May 18–22). The management of state and public sector land. In FIG Working Week 2011 (pp. 1–20), Marrakech, Morocco. https://www.fig.net/resources/proceedings/fig_proceedings/fig2011/papers/ts04b/ts04b_elia_4814.pdf
Herath, S., & Maier, G. (2015). Informational efficiency of the real estate market: a meta-analysis. Journal of Economic Research, 20(2), 117–168. https://doi.org/10.17256/jer.2015.20.2.001
Hernes, V. (2021). The case for increased centralization in integration governance: the neglected perspective. Comparative Migration Studies, 9, 32. https://doi.org/10.1186/s40878-021-00247-z
Higgins, D. M. (2022). Sovereign public sector property fund: building a conceptual framework. Journal of General Management, 49(1), 38–45. https://doi.org/10.1177/03063070221140727
Hoing, A., & Kaempf-Dern, A. (2019, January). Effective decision-making for municipal real estates [Conference presentation]. 26th Annual European Real Estate Society Conference, Cergy-Pontoise, France. https://doi.org/10.15396/eres2019_341
Just, T., & Maennig, W. (Eds.) (2012). Understanding German real estate markets. Springer. https://doi.org/10.1007/978-3-642-23611-2
Kaganova, O. (1999). What new have we learned through indicators. In Monitoring indicators of land and real estate reform in Russian cities (Report). The Urban Institute and the Institute for Urban Economics.
Kaganova, O., & Nayyar-Stone, R. (2000). Municipal real property asset management: an overview of world experience, trends and financial implications. Journal of Real Estate Portfolio Management, 6(4), 307–326. https://doi.org/10.1080/10835547.2000.12089624
Kaganova, O., & Amoils, J. M. (2020). Central government property asset management: a review of international changes. Journal of Corporate Real Estate, 22(3), 239–260. https://doi.org/10.1108/JCRE-09-2019-0038
Klumbytė, E., & Apanavičienė, R. (2014). Real estate strategic management model for Lithuanian municipalities. International Journal of Strategic Property Management, 18(3), 279–291. https://doi.org/10.3846/1648715X.2014.942407
Koopmans, T. C. (Ed.). (1951). Analysis of production as an efficient combination of activities. In Activity analysis of production and allocation. Cowles commission for research in economics (Monograph No. 13, pp. 33–97). John Wiley & Sons.
Liu, L., Zuo, W., Hu, Q., & Zeng, L. (2022). Research on property service mode innovation in the context of transformation and upgrading. International Journal of Strategic Property Management, 26(5), 332–344. https://doi.org/10.3846/ijspm.2022.17588
Mackevičius, J., & Ragauskienė, E. (2012). State property: economic analysis and management. Ekonomika, 91(2), 117–128. https://doi.org/10.15388/Ekon.2012.0.892
Marona, B., & van den Beemt-Tjeerdsma, A. (2018). Impact of public management approaches on municipal real estate management in Poland and the Netherlands. Sustainability, 10, 4291. https://doi.org/10.3390/su10114291
Mažylis, L., & Jasudavičiūtė, I. (2005). Real estate management in Lithuanian municipalities. Organisational Management: Systematic Research, 35, 137–148. (in Lithuanian)
Ministry of Finance of the Republic of Lithuania. (2017, February 23). Order of the Ministry of Finance of the Republic of Lithuania on establishment of efficiency indicators for the use of state real estate for administrative purposes and norms for the provision of real estate for administrative purposes necessary for the execution of activities and the implementation of the public functions of the state (No. 1K-65). Vilnius. (in Lithuanian)
Muczyński, A. (2015). An integrated approach to real estate (portfolio) management. Real Estate Management and Valuation, 23(2), 5–16. https://doi.org/10.1515/remav-2015-0011
National Audit Office of Lithuania. (2018). Management of State real estate (No. VA-2018-P-60-8-1). Vilnius.
National Audit Office of Lithuania. (2020, July 15). Management of State immovable property transferred to municipalities under the right of entrustment (No. VAE-6). Vilnius
Phelps, A. (2011). Municipal property asset management – a comparative study of UK and Russia. International Journal of Strategic Property Management, 15(4), 416–437. https://doi.org/10.3846/1648715X.2011.642537
Ragauskienė, E. (2011). Economic analysis of state property and the transformation of its management [PhD dissertation]. Vilnius University. (in Lithuanian)
Scarrett, D. (1983). Property management. Spon.
Seimas of the Republic of Lithuania. (2019, July 25). Amendment to the law on management, use and disposal of state and municipal property of the Republic of Lithuania (No. XIII-2398). Vilnius. (in Lithuanian)
Tamošiūnienė, R., & Paškevičienė, J. (2016). The relationship between financial ratios and the share price of a listed company in determining value. Science-Lithuanian Future, 8(2), 182–191. https://doi.org/10.3846/mla.2016.899
Trojanek, M. (2010). The application of income approach in property valuation in Poland. Economics & Sociology, 3(2), 35–47. https://doi.org/10.14254/2071-789X.2010/3-2/4
Trojanek, M. (2015). Strategic municipal real estate management. Journal of International Studies, 8(2), 9–17. https://doi.org/10.14254/2071-8330.2015/8-2/1
Turto bankas. (2016). Management, use and disposal of state assets in 2016 (Annual report). https://www.valstybesturtas.lt/filestore/content/files/view/VNT_Metine_ataskaita_2016_m%20(Final).pdf (in Lithuanian)
Turto bankas. (2017). Management, use and disposal of state assets in 2017 (Annual report). https://www.valstybesturtas.lt/filestore/content/files/view/web_TB_2017_18.07.25.pdf (in Lithuanian)
Turto bankas. (2018). Management, use and disposal of state assets in 2018 (Annual report). https://www.valstybesturtas.lt/filestore/content/files/view/web_TB_2018_19.08.07.pdf (in Lithuanian)
Turto bankas. (2019). Management, use and disposal of state assets in 2019 (Annual report). https://www.valstybesturtas.lt/filestore/content/files/view/TB_2019_02_web.pdf (in Lithuanian)
Turto bankas. (2020). Management, use and disposal of state assets in 2020 (Annual report). https://tbwebmedia.blob.core.windows.net/isoriniaifailai/VNT%20ataskaita%20uz%202020%20m.pdf (in Lithuanian)
Van der Voordt, T., & Arkesteijn, M. (2016). Corporate and public real estate management. In M. Arkesteijn (Ed.), Dear is durable. Liber Amicorum for Hans de Jonge (pp. 79–84). Delft University of Technology. www.researchgate.net/publication/309727486_Corporate_and_Public_Real_Estate_Management
Varnelis, T. (2011). Analysis of factors influencing the capitalization rate: the case of Vilnius-Lithuanian capital. Science-Lithuanian Future, 3(4), 99–104. https://doi.org/10.3846/mla.2011.076
Wheeler, B. (1993). The case for commercialization of local authority property [Conference presentation]. Local Authority Property Managers Conference, Wellington, New Zealand.
Wojewnik-Filipkowska, A., Rymarzak, M., & Lausberg, C. (2015). Current managerial topics in public real estate asset management. World of Real Estate, 4(94), 5–10.
Źróbek, S., Źróbek, R., & Kuryj, J. (2012). Gospodarka nieruchomo´sciami zkommentarzem do wybranych procedur [Real estate management with comment to selected procedures] (2nd ed.). Gall. (in Polish)